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What Do You Do if A UCC Lien is Filed Against You

If you have been served with a UCC lien, it can be a scary and confusing experience. What do you do? What does this mean for your business? Who should you talk to?

Don't panic — our New York legal team is here to help! We will provide a breakdown of what UCC liens are, how they are filed, what lenders can place liens on, and ways to remove the lien.

What Is a UCC Filing?

A UCC filing, also called a UCC lien or a UCC-1, is a financing statement lenders can file with your secretary of state against your business. A secured loan may be secured by a lien filed by the lender to protect the asset(s) you pledged to secure the loan. The asset may be equipment, a vehicle, property, or even a blanket lien naming all your assets.

Your business credit report may include a UCC-1, which protects a lender's interest for five years (unless the lender refiles). Keep in mind that UCC filings are public records. If you apply for new business financing, a UCC lien may still appear even if it doesn't appear on your business credit reports.

How Are UCC Liens Filed?

A UCC lien is filed when you have received a business loan or financing. Depending on your business's funding, the language and security/collateral on the UCC filing statement will vary.

Businesses' assets are often encumbered by blanket liens filed by unsecured business loan companies. In the event of default, this loan is still considered unsecured since it cannot penetrate the corporate veil and reach personal assets. The UCC-1 then creates a lien against the business entity and one or more debtor assets to secure the loan.

Only a few pieces of information are needed to prepare a UCC-1 Financing Statement. Below is an example of what is needed based on New York's Department of State:

  1. Debtor's name
  2. Additional debtors (if any)
  3. Information related to the debtor's organization
  4. Debtor's address
  5. Secured party's information
  6. List of collateral included as part of the agreement

What Can a Lender Place a Lien On?

UCC filings are used to gain security over something. UCC liens can be placed on a variety of things by lenders. It is easiest to understand in terms of collateral, a more commonly understood element of borrowing.

Most things that can be used as collateral for a loan can have a UCC lien placed on them. This includes:

  • Property
  • Equipment
  • Inventory
  • Vehicles
  • Receivables

Business owners should be aware that if any of the items listed above are used as collateral for a loan, the lender may file a UCC lien.

Ways to Remove a UCC Lien

There are a few ways to remove a business lien. Let's explore them.

Pay Off the Loan in Full

Though many may not have the funds available to pay off the loan, doing so is the easiest way to remove a UCC lien. Once you have paid off the loan, you can request that the lender release the lien. In the event that you are unable to pay off the loan in full, you may be able to negotiate with the lender. It may be possible to extend the loan, lower the interest rate, or make other changes to make it easier for you to repay the loan.

File for Bankruptcy

Another way to remove a UCC lien is to file for bankruptcy. However, this will have an impact on your business credit score. If you decide to file for bankruptcy, hire an experienced attorney who can help you navigate the process and ensure that all the necessary steps are taken to remove the lien.

Disputing Inaccurate Information on Your Business Credit Reports

If the UCC lien appears on your business credit reports, you will want to dispute any inaccurate information. This includes wrong dates, loan amounts, or anything else that is inaccurate. You should also check to see if the UCC lien has been released. If it has, make sure this is reflected on your business credit reports.

Have A Team On Your Side

Dealing with UCC-1 liens can be stressful and time-consuming.Our team at Jacovetti Law, P.C. has extensive experience handling UCC-1 liens. We will work with you to determine the best course of action and protect your business interests.

If you have any questions or want to discuss your case, don't hesitate to contact us today by calling (516) 217-4488 or through our online contact form. We offer free consultations and are here to help.